Mothercare, the one-stop shop for new parents since 1961, is experiencing some rather unpleasant growing (or should that be shrinking?) pains. The retailer has just reported a pre-tax loss of £21.5m for the 12 months to the end of March, which, although a vast improvement on the £103m loss a year earlier, is still, well, a loss.
Mothercare is in the midst of a wholesale turnaround by erstwhile Lovefilm boss Simon Calver. So far, the entrepreneurial whizzkid has closed 56 UK stores and plans to pull the shutters on 44 more. Calver has also spearheaded a massive international expansion drive, opening 31 new stores across the globe (although Mothercare’s Australian venture was put into administration in January).
The retailer now has around 1,300 stores worldwide, including 255 in the UK. Calver reckons that having just 200 stores on UK high street strikes the balance between remaining a big-name brand, and streamlining operations.
Despite the annual loss for 2012, the turnaround is going broadly to plan, says Calver. When one-off costs are stripped out, the group made an underlying profit of £8.3m. Admittedly, most of the cash was generated by Mothercare’s international business – the Mothercare brand still holds significant currency in Europe and beyond.
Sales outside the UK account for almost 60% of Mothercare's overall business, and this figure is growing year-on-year with international like-for-likes up 5.6% In Blighty, however, the business is doing rather less well. Sales have fallen 3.6% and, even stripping out one-off costs, the UK business lost £21.7m.
Mothercare’s business has suffered in recent years due to the massive influx of online stores hawking babywear and products. E-commerce giant Amazon alone boasts hundreds of thousands of kids accessories, from dummies and bibs to prams and toys: large range, tiny, tiny overheads. Nevertheless, Calver is hoping to cash in on parents’ desire to experience the look and feel of products before buying. Is that blankie really as soft as it looks?
Investors, however, aren’t convinced. Mothercare’s share price is down 4% to 349p this morning, and falling. Mothercare has become the sullen teenager on their porfolio that never does their chores…